Interview #137 : Colin King (Value Don't Lie)
Discusses background, investing strategy/style, and pitches two US small caps.
For this edition we welcome Colin King, writer/founder of the Value Don’t Lie newsletter.
(Disclaimer: This interview is for informational and educational purposes only, and should not be seen as investment advice. Please do your own research before investing in any company mentioned).
Thanks for taking the time to do this interview.
Can you please tell readers about your background, and how you got involved in investing in public companies?
My background is a blend of accounting, investing, and entrepreneurship.
I started my career in Big Four accounting, auditing public and private company financial statements.
This was a huge leap in my understanding of accounting and how financial statements are built (i.e. what lives behind each number). It also gave me early exposure to talking with company executives and management teams. I’m still hanging onto my CPA license to this day.
The next phase of my career was public markets investing as an analyst on the buy-side at a long-only GARP/special situations firm.
It was a small team of 3-4 analysts, very collegial, I covered 10 portfolio companies and had freedom to look at anything. I wasn’t really into investing in college, so I caught the “bug” a little later than most folks.
I learned a ton during my time at this fund, my PM and another analyst were phenomenal mentors and they had very different styles of investing.
On my first day of work, my PM handed me a copy of Greenblatt’s You Can Be A Stock Market Genius, which was pretty cool in hindsight.
We looked at just about every spin-off during my time there, if that gives you a sense for my current style of investing.
I was introduced to the concept of buying private companies from a colleague around 2015.
As a young and naïve value investor, I was attracted to the idea of building a mini-Berkshire style holding company of private businesses while redeploying cash flow into acquisitions or investments. It took 10+ years, but I finally did get there.
I met my current business partner in 2017. We have totally different world views, he’s an extremely frugal MacGyver-esque operator and marketer who previously worked at Google. And I’m a bit more risk tolerant, financial engineering type.
We’ve pulled together a few crafty special sits acquisitions in the private markets. It’s made for an excellent partnership and we continue to own everything 50/50 to this day.
We spent a year searching for a business to buy. My original thought was: take the things I learned in the public markets and how to identify a good business, and apply that to buying a private company.
In 2018, we bought our first business together, which was a parts delivery business, running auto and ag parts to dealerships in a tri-state area during a graveyard shift (12am to 11am was a typical shift). It was hard work with plenty of lessons learned.
That business was eventually sold and we redeployed the cash into a few other things throughout 2019.
Its been a slow build since then, but we’ve acquired at least one business each year since then, have sold a few things along the way, and added enough scale where we have a management team or at least a General Manager in each business.
Today, we have four operating groups in our holding company: a vertically-integrated consumer business, a home décor distributor, a financial training and services business, and a specialty insurance business.
We’re working on some public company investments at the holding company level as well, likely some friendly activist / suggestivist situations in smaller companies.
Hopefully our acquisition and operating experience can bring value to some of these smaller public companies.
Can you provide readers with a brief overview of Value Don’t Lie?
My newsletter covers mostly special situations of all varieties which I define as…
spin-offs
post-reorg
management changes
M&A transformations
stub securities,
activist investments,
good co / bad co situations
turnarounds
liquidations
I’m an all-cap investor focused in the U.S. and tend to find my best ideas in the $1 billion to $3 billion market cap range.
Some background on the newsletter…
You either have the public markets bug or you don’t, so despite the private company endeavors, I’ve never really stopped following the markets ever since I left my buy-side role.
VDL started in 2019 as a simple blog for me to track notes and otherwise force myself to keep doing research.
Eventually, it grew and I turned on the paywall, which forced me to keep at it and produce good work.
To understand what VDL is about is to understand my “Mount Rushmore” of investors…
I consider myself a value investor looking for cheap stocks. I’ve always been attracted to Walter Schloss with his purely quantitative approach and flexibility to own a wide basket of stocks (i.e. minimal concentration).
Next is Greenblatt… I love the concept of catalyst-driven investing and looking for hard events or inflections which can force a re-rate.
Most investors have an image of Michael Burry based on what he’s doing on Substack today; but years ago, there was an excellent article on his approach and style, which I devoured.
His concept of “ick” investing really resonated with me. To this day, I love finding ideas that others are repulsed by. The less popular a name is, the more I want to do work on it.
Last is the classic Buffett partnership era. There’s a lot you can take away from this part of his career: a willingness to own private stuff, control investments, special situations, plain vanilla, cheap stocks, you name it.